Market Wrap – Dec 2021

Markets, Covid and the Fed
Fed and COVID-19 variant cause jitters
  • Increasing COVID-19 cases and hospitalisations in Europe and escalating concerns over the new and highly contagious Omicron variant, dominated markets in November.
  • More lockdowns and restrictions have been imposed in Europe, especially those with lower vaccination rates, such as Austria, as they combat a fourth COVID-19 wave. Consumer confidence in the euro area fell to -6.8 points, the lowest in seven months.
  • Both Australian and international shares (hedged) declined in November returning -0.5% and -1.6% respectively.
  • Market jitters were intensified by expectations that the US Federal Reserve (Fed) could bring forward the pace of its tapering (asset purchases) but the uncertainty around Omicron could delay this.
  • Australian and international fixed interest rallied in November returning 2.1% and 0.7% respectively, as investors were drawn to more defensive assets following the emergence of Omicron.
Powell re-appointed, tightening lifts
  • Jerome Powell was reappointed for another four-year term as Fed Chairman. Market expectations that tapering would commence and rates begin to lift (from June 2022) rose.
  • Almost 200 countries at the UN Climate Change Conference (COP26) held in mid-November, agreed on the Glasgow Climate Pact to limit global warming to less than 1.5°C versus pre-industrial levels.
AUD falls to a two-month low
  • The USD continued to rally higher on earlier Fed tightening, pushing the AUD to a two-month low
  • The AUD also fell as the RBA’s tightening expectations eased.
  • Oil prices fell with a large market sell-off caused by the arrival of the Omicron variant and concerns over global growth and particularly Chinese growth.
  • Commodity prices, including iron ore, also fell in November, following the weaker signals in China’s economy and rising inventories at Chinese ports.
Major asset class performance (%)
Asset classes 1 month 12 months 5 years (pa)
Australian shares -0.5% 16.0% 10.3%
International shares (hedged) -1.6% 23.3% 13.8%
International shares (unhedged) 3.7% 26.8% 15.7%
International emerging markets (unhedged) 1.6% 6.7% 10.4%
International small companies (unhedged) 0.8% 24.7% 13.0%
Global listed property -1.0% 27.2% 6.9%
Cash 0.0% 0.0% 1.1%
Australian fixed interest 2.1% -3.2% 3.3%
International fixed interest 0.7% -0.8% 3.3%

Source: JP Morgan and IOOF, 30 November 2021.

Indices: Australian shares: S&P/ASX 300 Accumulation | International shares (hedged/unhedged): MSCI World ex Australia Net | International emerging markets: MSCI Emerging Markets Net in AUD (unhedged) | International small companies (unhedged): MSCI World ex Aust Small Cap | Global listed property: FTSE EPRA/NAREIT Developed Rental Index ex Australia (hedged) | Cash: Bloomberg Bank Bill | Australian fixed interest: Bloomberg AusBond Composite 0+ Yr Index | International fixed interest: Barclays Global Aggregate Bond Index (hedged).

Please note: Past performance is not indicative of future performance.

Exchange rates At close on 30/11/21 % change in 1 month % change in 12 months
AUD/USD 0.71 -5.20 -2.95
AUD/Euro 0.63 -3.37 2.08
AUD/Yen 80.66 -5.95 5.29
Trade weighted index 60.20 -4.60 -2.11

Source: Bloomberg and IOOF, 30 November 2021. All foreign exchange rates are rounded to two decimal places where appropriate.

Please note: Past performance is not indicative of future performance.

Important information: This document is issued by IOOF Investment Services Ltd (IISL) ABN 80 007 350 405, AFSL 230703. IISL is a company within the IOOF Group which consists of IOOF Holdings Ltd ABN 49 100 103 722 and its related bodies corporate. This document contains factual information only and is based in part on information obtained in good faith from third party sources. The information in this document is current as at 4 November 2021. While this information is believed to be accurate and reliable at the time of publication, to the extent permitted by law, no liability is accepted for any loss or damage as a result of reliance upon it.


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